The world is heating up, and so is the race to fix it. Venture capital (VC) firms, the big-money players who fund new businesses, are pouring billions into climate-tech startups. These are companies working on everything from clean energy to carbon capture to eco-friendly food. The shift is huge—climate tech is no longer a side bet; it’s becoming a main focus for investors who see both profit and planet-saving potential. Let’s break down why this is happening, who’s leading the charge, and what it means for the future.
What Is Climate Tech?
Climate tech is all about using technology to fight climate change. It covers a wide range of ideas, like solar panels that power homes, batteries for electric cars, or even machines that suck carbon dioxide out of the air. These startups aim to cut greenhouse gas emissions, make industries greener, or help the planet adapt to changes like rising sea levels.
Unlike traditional tech startups that might focus on apps or gadgets, climate-tech companies often tackle big, real-world problems. They might need more money upfront and take longer to turn a profit, but the payoff could be massive—not just in dollars, but in saving the environment.
Why Venture Capital Is Betting Big on Climate Tech
Venture capital is all about finding the next big thing. So why are VC firms suddenly so excited about climate tech? A few key reasons explain this shift.
1. Climate Change Is Urgent
The planet is in trouble. Wildfires, floods, and heatwaves are becoming more common, and scientists say we need to act fast to keep global warming under control. Governments, businesses, and everyday people are demanding solutions. This creates a huge market for climate-tech startups, and VC firms want in on the action before it’s too late.
2. Government Support Is Growing
New laws and policies are making climate tech a safer bet. For example, the U.S. Inflation Reduction Act offers tax breaks and subsidies for clean energy. In Europe, carbon pricing makes polluting more expensive, pushing companies toward greener options. These policies create demand for climate-tech solutions, giving startups a better shot at success. VC firms see this as a green light to invest.
3. Consumers Want Sustainability
People are more eco-conscious than ever. They’re buying electric cars, eating plant-based foods, and choosing brands that care about the planet. This shift in consumer behavior is a goldmine for climate-tech startups. Investors know that companies meeting this demand could make big profits.
4. Big Returns Are Possible
Climate tech isn’t just about saving the world—it’s also about making money. The value of climate-tech startups globally hit $3.4 trillion in 2024, up from $2.0 trillion in 2022. That’s a 33x increase in just a decade! VC firms are betting that some of these startups will become the next Tesla or Amazon, delivering huge returns.
5. The Tech Is Ready
Many climate-tech solutions, like solar power or electric vehicle batteries, have been around for a while but are now cheaper and more efficient. This makes it easier for startups to scale up and compete. Investors are more confident putting money into proven technologies that can actually work.
How Much Money Is Flowing In?
The numbers are staggering. In 2021, climate-tech startups raised $37 billion in venture capital across over 1,100 deals. By 2022, climate tech was grabbing more than a quarter of all VC dollars, with $50 billion invested in 2023 alone. Even though funding dipped to $8.1 billion in early 2024 due to economic uncertainty, it’s still a massive amount compared to a decade ago.
Some startups are landing huge deals. For example, H2 Green Steel, a Swedish company making low-carbon steel, raised $215 million in equity and $4.5 billion in debt in 2024. Another, CarbonCure Technologies, which makes eco-friendly concrete, has pulled in $97 million over 12 funding rounds. These big investments show just how much faith VCs have in climate tech.
Who’s Leading the Charge?
A handful of VC firms are standing out as major players in climate tech. These firms aren’t just writing checks—they’re offering expertise, connections, and long-term support to help startups grow.
Breakthrough Energy Ventures
Founded by Bill Gates, Breakthrough Energy Ventures is one of the biggest names in climate-tech investing. They focus on startups that can cut emissions in tough industries like manufacturing and transportation. In 2024, they raised $555 million for a new fund, backing companies like Aeroseal (energy-efficient buildings) and Heirloom (carbon capture).
Lowercarbon Capital
Lowercarbon Capital, started by early Uber investor Chris Sacca, is all about slashing carbon emissions. They’ve raised $550 million for two funds and invest in everything from carbon removal to zero-carbon cement. Their portfolio includes startups like Solugen (green chemicals) and Antora (energy storage).
Octopus Ventures
Based in the UK, Octopus Ventures raised $800 million in 2023 and is backing climate-tech startups across seven sectors, including climate and deep tech. They work closely with founders, offering guidance to help companies like Orbex (sustainable space tech) grow.
SOSV
SOSV is a global VC firm that loves early-stage startups. They’ve backed over 1,000 companies, many in climate tech, through programs like IndieBio and HAX. Their “Climate Tech 100” list highlights top startups, which together raised $3.68 billion. SOSV also invests in critical minerals for batteries and electric vehicles.
Pale Blue Dot
This European VC firm focuses on early-stage startups tackling climate change. They believe profit and impact go hand-in-hand and back diverse teams working on carbon reduction or climate adaptation. Their investments include innovative companies across industries like energy and agriculture.
What Kinds of Startups Are Getting Funded?
Climate tech is a big umbrella, covering lots of different ideas. Here’s a look at the main areas VC firms are betting on.
Clean Energy
Energy startups are a hot spot, grabbing nearly 35% of climate-tech funding in 2024. Companies working on green hydrogen, solar power, and energy storage are getting big checks. For example, two green hydrogen ventures raised over $1 billion each in 2024.
Carbon Capture and Removal
Startups that pull carbon dioxide from the air or store it underground are gaining traction. Carbon capture funding jumped 39% from 2022 to 2023, though it’s still a small slice of the pie. Companies like Heirloom and Graphyte are leading the way.
Sustainable Agriculture
Food production is a major source of emissions, so startups creating plant-based foods or carbon-capturing farming methods are getting attention. Loam Bio, an Australian startup focused on soil carbon capture, raised $70 million in 2023.
Low-Carbon Transport
Electric vehicles and other green transport solutions are a big draw. In 2023, low-carbon transport startups took 27% of climate-tech funding, though that’s down from previous years as the market matures. Companies like Polarium, which makes smart lithium batteries, raised $273 million.
Industrial Decarbonization
Heavy industries like steel and cement are huge polluters. Startups like H2 Green Steel and CarbonCure are finding ways to make these industries greener, attracting big investments.
Challenges for Climate-Tech Startups
Even with all this money flowing, climate-tech startups face some tough hurdles.
High Costs and Long Timelines
Unlike software startups, many climate-tech companies need expensive equipment or factories. Building a new battery plant or carbon capture system can cost billions and take years to turn a profit. This makes some investors nervous, as they often want quick returns.
Scaling Up Is Hard
Taking a great idea from a lab to the real world is tricky. Startups need partnerships with big companies or governments to grow, which can be tough for new players without a track record.
Economic Uncertainty
Funding dropped 40% in 2023 due to high interest rates and global conflicts. While climate tech is still attractive, some investors are playing it safe, focusing on mid- or late-stage startups with proven results rather than risky early-stage ones.
Not Enough Early-Stage Funding
Early-stage deals, where startups are just getting started, fell from 67% of climate-tech deals in 2018 to 47% in 2023. This could mean fewer new ideas in the pipeline, which is a problem for long-term innovation.
How Startups Can Stand Out
With so many climate-tech startups competing for funding, how do they catch a VC’s eye? Here are some tips.
Show Real Impact
Investors want to see that a startup can make a dent in emissions. Companies that can prove their tech cuts carbon at scale—like reducing 10 million tons of CO2 per year—have a better shot at funding.
Prove Traction
VCs love startups with customers or revenue. Showing that people are already buying your product or service makes you less risky.
Build a Strong Team
A diverse, experienced team is a big plus. Firms like Pale Blue Dot prioritize founders who bring unique skills and a commitment to diversity.
Leverage Partnerships
Connections with big companies or governments can help. For example, Detect Technologies worked with Shell’s accelerator before landing $28 million in funding.
Pitch a Clear Plan
Startups need to explain how they’ll use the money to grow and make a profit. VCs want to know the tech is viable and the business model works.
The Role of Corporate Venture Capital
It’s not just traditional VC firms getting involved. Corporate venture capital (CVC)—where big companies invest in startups—is also on the rise. In 2024, 61% of corporate deals were in mid- or late-stage startups, showing companies want proven tech they can scale.
For example, ArcelorMittal, a steel giant, runs the XCarb Innovation Fund to back startups solving low-carbon challenges in steel production. Shell Ventures invested in Detect Technologies, and Panasonic backed Tado, a smart thermostat company. CVCs bring not just money but also industry connections and expertise, helping startups grow faster.
What’s Next for Climate-Tech Investing?
The future looks bright for climate tech, even with some bumps in the road. Here’s what to expect.
More Focus on High-Impact Sectors
Investors are zeroing in on industries like steel, cement, and agriculture, which produce a third of global emissions but get less funding. Expect more money to flow into these areas as solutions mature.
Growth in Emerging Markets
While the U.S. and Europe lead in climate-tech funding, places like India and Sub-Saharan Africa are catching up. India’s climate-tech funding hit $1.5 billion in 2024, and African startups are making waves in energy and agriculture.
New Technologies on the Horizon
Innovations like green hydrogen, advanced batteries, and direct air capture are getting more attention. As these technologies improve, they’ll attract even bigger investments.
A Push for Collaboration
Startups, governments, and big companies will need to work together to scale solutions. Policies, incentives, and partnerships will be key to making climate tech a global success.
Why This Matters
The shift to climate tech isn’t just about money—it’s about survival. With climate risks like extreme weather topping global concerns, the world needs these startups to succeed. Venture capital is playing a huge role by giving innovators the cash and support they need to grow.
But it’s not all smooth sailing. Economic challenges and high costs mean investors need to be smart about where they put their money. Startups, meanwhile, need to prove they can deliver real results. If both sides get it right, climate tech could transform how we live, work, and power our world.
For now, the VC world is sending a clear message: climate tech is the future. Whether it’s a startup making green steel or one capturing carbon, these companies are getting the backing to change the game. And that’s something we can all get behind.
